Auditor Fees and Going-Concern Reporting Decisions on Bankrupt Companies: Additional Evidence

Read, William J.

doi:10.2308/ciia-51109

Cited by 12 publications

(9 citation statements)

References 25 publications

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“…Legislators and regulators are, however, predominantly concerned when an auditor has not provided a warning prior to a company failing (Geiger and Raghunandan, 2002;Read, 2015). Prior research typically defines Type 2 misclassification when an auditor fails to issue a GCO to a company that subsequently goes bankrupt.…”

Section: Prior Literature and Research Questionsmentioning

confidence: 99%

Explaining auditors’ propensity to issue going‐concern opinions in Australia after the global financial crisis

Carson

Fargher

Zhang

2017

Accounting & Finance

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We document an increase in auditors issuing going-concern opinions in Australia over a prolonged period since the Global Financial Crisis that is not fully explained by changes in client risk. Overall, our evidence is consistent with auditors reporting more conservatively with the increased level of scrutiny from Australian Securities and Investments Commission inspections and other increased regulation, and in particular, the negative attention following the 2011-2012 inspections. As a result, auditor reports with reference to goingconcern issues have become less informative regarding future corporate failure.

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Section: Prior Literature and Research Questionsmentioning

confidence: 99%

Explaining auditors’ propensity to issue going‐concern opinions in Australia after the global financial crisis

Carson

Fargher

Zhang

2017

Accounting & Finance

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“…However, Craswell (1999) does not confirm the relationship between qualified opinions and the provision of NAS. Similarly, DeFond, Raghunandan, and Subramanyam (2002) and Read (2015) find no significant relation between going-concern decisions and both audit and NAS fees.…”

Section: Nas and The Auditor Independencementioning

confidence: 92%

The Audit Reform and Non-Audit Services in the Light of the Big-4 Transparency Reports – the EU Perspective

Indyk¹

2020

AEF

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The aim of this article is to compare and contrast three different approaches towards non-audit services (henceforth “NAS”) based on: 1) researchers’ views, 2) the EU regulation, and 3) the provision of NAS by the Big-4 firms operating in twenty-seven EU member states. Therefore, the article includes: (i) a literature review of various NAS aspects, (ii) an analysis of the EU reform in terms of NAS, and (iii) an empirical analysis of NAS fees which have been disclosed in the Big-4 transparency reports for the period 2017-2019.The literature review shows: a) lack of consensus between researchers about the potential consequences of the NAS provision in general, b) quite limited or little evidence of the consequences of the NAS restrictions as part of the EU audit reform, c) ambiguity in terms of the NAS definition itself which results mainly from insufficient NAS disclosures and lack of a detailed NAS split.The EU regulators addressed these concerns only in very narrow aspects, i.e., through: (1) the NAS black list, (2) the NAS cap, and (3) the strong emphasis on public-interest entities (henceforth “PIEs”). What is more, NAS disclosure requirements in the transparency reports are limited only to two categories.Finally, the results of the empirical study indicate the significant differences at the NAS fee level among the EU member states. The analysis shows a particular importance of NAS fees from other clients as a substantial revenue stream for the Big-4 firms. The results suggest also a significant increase in this category in 2018 when NAS fees from other clients increased by net EUR809 million (13%). However, this strong trend was not confirmed in the following year.All in all, the study underlines deficiency in proper NAS disclosure and reporting which might be observed also in the case of transparency reports. All findings of this study may be another argument for regulators to address the problem of NAS in more detail starting from their advice on a NAS taxonomy which might be used then as a point of reference. It would be also beneficial for researchers exploring the NAS aspect and, thus, may enhance data and results comparability between studies. Additional disclosure requirements like NAS provided to PIEs or a recurring or non-recurring character of NAS would also support the better understanding and evaluation of the consequences of the EU audit reform.

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“…Além disso, o auditor ainda deve se preocupar com as possíveis consequências econômicas que ele pode vir a sofrer devido a emissão de um parecer modificado, como a perda do cliente e, consequentemente, os honorários correspondentes. Read (2015), em contraste, argumenta que nenhuma associação significativa entre os honorários dos auditores e a emissão de um relatório com ênfase em continuidade operacional em empresas falimentares foi encontrada. Entretanto, o mesmo argumenta que empresas que contratam seu auditor para a auditoria das demonstrações financeiras do ano subsequente ao pedido de falência possuem, significativamente, menos chances de terem um parecer com ênfase em continuidade operacional emitido.…”

Section: Estudos Anterioresunclassified

Opinião do Auditor Independente Sobre o Risco de Continuidade Operacional: Uma Análise de Casos Múltiplos / Auditor's Opinion on Going Concern Risk: A Multiple-Case Study Analysis

Nogueira¹,

Silva²

2022

BJB

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O presente estudo tem como objetivo analisar o impacto gerado quando uma firma de auditoria independente sinaliza um problema de continuidade operacional antes da solicitação da recuperação judicial pela empresa. Além disso, de forma complementar, este estudo analisa, comparativamente, as mudanças de práticas contábeis ocorridas nas companhias após seus pedidos de recuperação judicial. Para cumprir tal objetivo, foram estudadas quatro companhias, auditadas por empresas de auditoria de grande porte, as denominadas “Big Four”, que tiveram seu problema de continuidade operacional informada ao mercado antes de seu pedido de recuperação judicial. Os dados analisados demonstram que, os pareceres de auditoria são instrumentos significativos para a avaliação das companhias e que para cada caso analisado, a resposta do mercado, apesar de apresentar similaridades, foi única. Este estudo contribui para melhorar o compreendimento dos impactos causados nas companhias, e no mercado, quando o a auditoria emite um parecer com ênfase na continuidade operacional antecipadamente.

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Auditor Fees and Going-Concern Reporting Decisions on Bankrupt Companies: Additional Evidence

Cited by 12 publications

References 25 publications

Explaining auditors’ propensity to issue going‐concern opinions in Australia after the global financial crisis

Explaining auditors’ propensity to issue going‐concern opinions in Australia after the global financial crisis

The Audit Reform and Non-Audit Services in the Light of the Big-4 Transparency Reports – the EU Perspective

Opinião do Auditor Independente Sobre o Risco de Continuidade Operacional: Uma Análise de Casos Múltiplos / Auditor's Opinion on Going Concern Risk: A Multiple-Case Study Analysis

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